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This appeal against a confiscation order made under Proceeds of Crime Act 2002 (“the Act”) analysed tainted gift provisions and made practice suggestions.

Detail

The confiscation arose out of fraud convictions by D against her employer (a Credit Union) where D dishonestly made transfers from members’ accounts to her family or created false loans.

The lifestyle provisions applied. Benefit was £45,000 and included a £20,000 tainted gift from D to her daughter representing equity in a property gifted in 2008. The calculation of the value of the gift was based on an admission D made in an affidavit placed before the Crown Court. D had no assets but due to the tainted gift provisions D’s recoverable amount was £20,000 and the Confiscation Order was made in that sum.

At the time of the Confiscation Hearing the judge accepted that the mortgage company would take possession of the property due to mortgage arrears and sell it, leaving the daughter with a debt owed to the company. The judge accepted that D had no other assets and that the default sentence would have to be served. There was an order that any sums recovered under the confiscation order would be paid as compensation to the Credit Union.

The money was not paid. D returned to Court and made an unsuccessful application to vary the confiscation order downwards. The Magistrates’ Court subsequently activated the default term. The Defendant then made an out of time appeal to the CA.

At the Appeal Hearing the Appellant attended in person, her family having paid the confiscation order in full.

The argument on appeal was that the confiscation order was unjust. However, the CA found that the judge had correctly applied the law.

The Court commented that since the Order was made, s6(5) of the Act had been amended to include a provision that a confiscation order should not be made to the extent it would be disproportionate (a statutory codification of the judgment in Waya [2012] UKSC 28 that a confiscation order must not be disproportionate and a breach of A1-P1). Thus the obligation on a court to make a confiscation order in the sum of the benefit is not absolute (judgement paragraph 29).

At judgment paragraph 31 the Court suggested that in a case where the Crown seek to recover the value of a tainted gift that the Court accepts to be worthless at the date of the confiscation order, the Court should consider three things:

The robustness of the evidence of the value of the tainted gift.

The proportionality of making the order, appreciating that the making a proportional order is not to be equated with a general discretion to avoid hardship.

The appropriate default term, noting that there is no minimum term of imprisonment and that where the Court could be satisfied that enforcement would be impossible there could be a “substantial reduction”.

The Court asked whether the order made in this case was proportionate and commented at judgment paragraph 35 that; “The categories of disproportionality which have so far been recognised by the courts appear to be cases where the conduct of the offender has extinguished or reduced the loss”

The CA found that the facts in the appeal were far removed from the recognised categories of disproportionality: The amount gained by D had not been reduced by any action taken by her and the order made was far less than she had benefited from her criminal conduct.

The appeal was accordingly dismissed.

Comment

The judgment provides assistance in the interpretation of the tainted gift provisions and confirms the aim of the Act is to discourage and prevent criminals from gifting assets by coercing them into paying back the value of those gifts (see R v Kim Smith [2013] EWCA Crim 502 and judgment paragraphs 25-26).

The Court (judgment paragraph 31) gives guidance for the correct approach where a Confiscation Order is sought by the Crown which seeks to recover the value of a tainted gift which is worthless at the date of the Order. It is to be recognised that the Act is designed to recover the value of gifts (rather than the gifts themselves) and that general hardship cannot be deployed to suggest such a confiscation order would be disproportionate.

The approach of the Court appears to be to recognise the legal constraints of the Act and case law, but mitigate the practical effect by suggesting that there could be a “substantial reduction” in any default term. The reference to the fact that there is no minimum default term, appears to leave open a submission in that if the facts suggested some hardship that was exceptional hardship that there should be no (or a very short) default term.

In those circumstances a Defendant would still be required to pay the order (with interest accruing after time to pay expired), but would not face the default term of imprisonment in circumstances where there was no prospect of recovering the value of the gift.